By CONRAD ONYANGO High financing and operations costs took a toll on East African Breweries limited (EABL) profits over the last six months to December 2012, compared to a similar period the previous year. The beer manufacturer recorded an 18 percent slump in its pretax profits from Sh 4.87 Billion in December 2011 compared to Sh 3.98 Billion by end of December 2012. The drop in profits has been attributed to acquisition of a 20 percent minority stake in Kenya Breweries at a cost of Sh 4 billion, investment funds set for capacity and process improvements in the country. The investment helped push the firm’s equity debt from Sh600 million to the current 21 billion shillings. “We will however use cash from internal operations to leverage on the huge equity debt,” said EABL group Finance Director, Tracey Barnes yesterday during an investor briefing at a Nairobi hotel. EABL also cited high operating costs mainly from importation of malt among other raw materials for beer manufacturing as well as distribution costs punched some holes in the balance sheet. Over the last six months to December 2012, sales costs surged 13 percent from 14.3 million to 16.2 million, against an operating profit of seven percent compared to the previous year. “Change of land use pattern in the country like development of real estate’s led to reduced land size, a scenario that pushed us to imports. However, we have started cultivation of new varieties of barley for more yields to cushion high import costs,” said Patrick Kamugi, EABL director of supply. Despite the slump, increased consumer spending among Kenyan youths pushed the firm’s local net revenues by 12 percent from July to December last year. The beer maker recorded strong growth in the beer portfolio and in the premium spirits in the country attributed to favorable price adjustment that attracted the youthful customers. “We are particularly pleased by 45 percent net revenue growth in our premium spirits portfolio, which was boosted by introduction of reserve brand and super premium spirits,” said EABL Group Managing Director, Devlin Hainsworth. The firms subsidiaries had tough half year of business with Tanzania experiencing a softening alcohol beverage market occasioned by tax increase while Uganda suffered from a flattened consumer economy. Over the review period, the two countries weathered the challenges to post 16 percent in Tanzania as Uganda parted with a three percent in revenue growth.
